U.K. fines Goldman $27 million in 'Fab' case

By Aaron Smith, staff writerSeptember 9, 2010: 8:50 AM ET

NEW YORK (CNNMoney.com) -- Britain's Financial Services Authority said Thursday it has fined Goldman Sachs International nearly $27 million for not disclosing its investigation by the U.S. Securities and Exchange Commission.

The regulatory agency said Goldman should have revealed that it was under investigation by the SEC for the allegedly fraudulent activity of Fabrice Tourre, a London-based Goldman trader.

The FSA said the fine of £17.5 million stems from Goldman's "failure to notify the FSA of matters related to the [SEC] investigation into the Abacus 2007-AC1 synthetic collateralized debt obligation."

An SEC lawsuit accused Tourre of selling the "Abacus" portfolio of real estate investments in 2007 that had a high likelihood of losing value because it was selected by Paulson & Co., a hedge fund that was betting it would fail. The SEC says that Tourre concealed Paulson's role from investors, who lost $1 billion on the deal.

Tourre has denied the allegations, which included the SEC's reference to a 2007 e-mail in which the trader said that he knew of his firm's corrosive investments and boasted of his Wall Street prowess, referring to himself as the "fabulous Fab."

The FSA said Goldman should have been forthcoming about the U.S.-based investigation.

"GSI did not set out to hide anything, but its defective systems and controls meant that the level and quality of its communications with the FSA fell far below what we expect of an authorized firm," said Margaret Cole, managing director of enforcement and financial crime for the FSA.

"We've agreed to the fine," said Goldman spokesman Mike DuVally. "We're pleased this matter has been resolved." He said the firm would not admit or deny the U.K. charges.

The FSA fine is in addition to a $550 million settlement with the SEC for allegedly misleading investors. Goldman agreed to the U.S. fine in July without admitting or denying the charges against it.

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